Establishment and Management of Endowments
Policy Number: 46
- Date Reviewed:
- June 2020
- Responsible Office:
- Office of Development
- Responsible Executive:
- Vice President for Development and Public Affairs; Executive Vice President & Chief Academic Officer
I. POLICY AND GENERAL STATEMENT
The University of Texas Health Science Center at Houston ("university") seeks and receives private sector contributions for the purpose of establishing endowments to fulfill its mission and goals. Endowments are designated for endowed faculty positions (chairs and professorships), scholarships, fellowships, and other educational activities.
The university strives to uphold the highest level of accountability by reporting annually to donors on the use of income distributions from their endowments.
True endowments: Funds for which donors have stipulated, under the terms of the creating gift agreement, that the principal of the fund is not currently expendable. It is to remain in perpetuity and invested for the purpose of producing present and future income.
Quasi-endowments: Funds established with institutional funds or unrestricted gifts that function as endowments as a result of a determination by the Board of Regents of The University of Texas System ("Board of Regents") that these funds are to be retained and invested. They differ from true endowments in that the Board of Regents, or designee, can, at its exclusive discretion, return these funds to current funds.
Term endowments: Funds for which the donor has stipulated that the principal may be expended after a stated period or on the occurrence of a certain event.
A. Establishing an Endowment
To establish an endowment, the Office of Development ("OD") works with the donor to define the purpose and terms and prepares a gift agreement to document those terms. OD requests acceptance in accordance with UT System Administration Policy 138 Gift Acceptance Procedures. The endowment cannot be announced publicly until accepted in accordance with the procedures in UT System Administration Policy 138. OD provides the holder of an endowed academic position ("holder") or the principal investigator ("PI") of an endowed fund with a copy of the applicable gift agreement. The endowment's stated purpose and terms will determine whether it is considered a true endowment, term endowment or a quasi-endowment.
Funding of endowments may occur outright with cash or an equivalent or by pledge. The endowment may be initiated with receipt of a minimum of 20 percent of the ultimate pledge. Payment of the remaining pledge may not be extended beyond five years, except in rare circumstances. Endowment monies received by OD will be transferred to UT System to be invested.
Income distributions from endowments are deposited into local endowment accounts on a quarterly basis.
1. Addition to an Established Endowment
As with all charitable contributions to the university, upon receipt of a gift meant to augment an established endowment, the gift and related correspondence must be forwarded to OD (HOOP 203 Gifts: Solicitation, Acceptance, Processing, Acknowledgement and Stewardship and the instructions for gift deposits).
2. Managing an Endowment
Endowment distributions cannot be used to establish or create, in whole or in part, another endowment, except in accordance with UT System Administration Policy 138 Gift Acceptance Procedures.
Endowment distributions are an important source of funding and should be expended on an annual basis. Endowments will be monitored for amount and appropriateness of expenditures. Funds should be allowed to accumulate only if they are being saved for a specific purpose.
In addition to reviewing expenditures requests, the Gift Assurance Officer in OD regularly reviews all endowments to ensure compliance with the purpose of the endowment and with UT System and university policies. The Gift Assurance Officer monitors for various elements, such as appropriateness of expenditures, excessive accumulation of funds, and whether a position is vacant and if so, for how long. When there is a compliance issue, the PI or holder will be notified and will be required to effect a timely resolution.
3. Employee Training
Each employee involved in managing or expending endowed funds must complete certain required training every two years. If such training is not completed in a timely fashion, access to endowed funds may be suspended until the training is completed.
All newly-appointed PIs and holders will meet with the Gift Assurance Officer for initial training. Access to endowed funds will not be given until this initial training is completed. It is the responsibility of the PI or holder to notify the Gift Assurance Officer when he or she has a new financial administrator managing endowed funds.
B. ENDOWED POSITIONS
1. Appointments to an Endowed Position
The university considers the process of naming incumbents to endowed positions a high institutional priority. The members of the faculty who are named to such positions represent the highest academic, research and service standards of the university.
Faculty who are considered for endowed chairs, professorships or faculty fellowships must have a record of exemplary performance in those areas of activity that are vital to the academic environment and mission of the university and must meet the donor's criteria for the chair, professorship or fellowship consistent with the Rules and Regulations of the Board of Regents. The President may establish additional criteria for a particular position so long as the criteria remain consistent with the donor's intent and the Rules and Regulations of the Board of Regents.
Appointments to endowed positions can be for terms of up to five years. The pertinent school's Appointments, Promotion and Tenure Committee must review all initial appointments to endowed positions and make a recommendation to the dean. The dean will review this recommendation and, if approved, forward it to the Office of Faculty Affairs and Development ("OFAD") for final review and approval on behalf of the Executive Vice President & Chief Academic Office ( "EVP/CAO"). Appointment decisions for those endowed positions not assigned to a school are made by the President.
Appointment to an endowed position is separate from appointment to the faculty. A decision to award tenure to a current or prospective holder of an endowed position affects only the regular faculty appointment; it does not imply a commitment for continuance in the endowed position.
Endowment titles must be relinquished upon the holder's leaving the university, retirement, assumption of less than full-time appointment, or stepping down from an academic administrator position to which the title is linked (e.g., department chair). Exceptions may be considered with agreement of the relevant dean, EVP/CAO, OFAD, OD and the President. The dean must inform OD, which will send a copy to the EVP/CAO and OFAD, when a holder relinquishes or becomes ineligible to hold an endowed position.
OD is responsible for guiding this process at the behest of the President and will maintain records of all endowed chairs/professorships/faculty fellowships, including the purpose and any qualifications and restrictions designated by the donor and a list of the incumbents. OD will be responsible for ensuring compliance with the university’s policies on all such appointments.
The detailed procedures regarding selection and initial appointment of endowment holders are found on the website of the Office of the Executive Vice President & Chief Academic Officer.
2. Reporting Responsibilities
As a condition of continued appointment, all holders of endowed professorships/chairs/faculty fellowships will submit an annual report to OD. This report will consist of two parts: 1) a brief accounting of how the funds associated with the position were used during the preceding fiscal year and (2) a report of activities/accomplishments in the preceding year related to the holder or the intent of the endowment.
If an endowed academic position is vacant, the dean or his/her designee should submit a summary of recruitment efforts and plans for filling the vacancy, which will be shared with the donor. For endowed scholarships, lecture series, etc., the PI must provide details of how the money was spent, e.g., the name of the scholarship recipient and brief biographical information.
These reports are due by December 1 each year. Each fall, the EVP/CAO will request the narratives and other endowment information to be submitted to the Gift Assurance Officer in OD.
The Gift Assurance Officer coordinates the completion of annual reports to endowment donors, including a letter from the Vice President for Development and Public Affairs, an endowment financial report, the narrative on the use of the endowed funds and the scholarly achievements of the holder, if applicable.
3. Reviews of Endowed Position Holders
The Associate Vice President of Faculty Affairs and Development will conduct reviews of holders of endowed positions at least every five years and will provide the dean of each school with recommendations for the continued appointment of individuals holding endowed positions.
These reviews will include, at a minimum, whether the holders continue to meet the criteria for holding the endowment, the scholarly activities of the holder, the holder’s management of the endowment funds, and a review of the annual reports provided by the holder. Following the review by OFAD and the approval or recommendations of the dean, OFAD will forward its recommendation to the President, who will make the final decision as to whether the holder is to continue for an additional term of up to five years, continue for a shorter term prior to an additional review, or be replaced by another holder. The President will notify the EVP/CAO, OFAD, OD, and the dean of the final decision. For deans holding endowed positions, the review will be conducted by the university’s Appointments, Promotion and Tenure Committee.
If a new holder is to be named, the dean will make a recommendation to the President according to the guidelines found on the website of the EVP/CAO. The President will make the final decision and will notify the dean, the EVP/CAO, OFAD, and OD.
4. Managing an Endowed Position
The holder is responsible for the management and expenditure of the endowment distributions for each of the endowments entrusted to him or her.
Holders are responsible for using endowment distributions for the purpose(s) intended by the donor(s), according to the document(s) associated with the establishment of the endowment(s) and in accordance with applicable UT System and university policies and procedures.
Endowment distributions will be budgeted and used by PIs or holders to carry out the university's mission of education, research, clinical practice and service in accordance with the donor's wishes and all applicable university policies and procedures.
The holder is required to provide an explanation and a plan to expend the accumulation when the accumulation is greater than or equal to two years of endowment distributions. The plan to expend the accumulation is subject to approval by the OD. When it is impossible or impractical to use an endowment's distribution accumulations, an exception may be granted by OD, upon request of the holder.
Subject to conditions or restrictions required by the donor(s) and consistent with the Board of Regents Rules 60202, Section 5 and 6, up to 50% of distributions from the endowment may be used for the endowed chair/professorship holder’s compensation (including base salary, augmentation and supplements) and associated benefits, and of that, up to 25% may be used for base salary, augmentation and associated benefits (i.e. if total distributions are $1000, up to $500 may be used for the holder’s compensation and associated benefits, of which up to $250 may be used for base salary, augmentation and associated benefits). Each school will establish and maintain policies and procedures for implementing these total compensation provisions if it so chooses. Distributions may also be used for other professional support of the holder.
Signature authority for expenditure accounts for endowments will be given only to the PI or holder. OD will review and approve expenditures prior to payment. The dean or designee of the respective school will have signature authority for unfilled academic positions for recruiting purposes only, in accordance with guidelines of the Board of Regents.
Noncompliance with endowment policies, procedures and guidelines may result in suspension of a holder's access to endowed funds or loss of the employee's position as holder of the endowment.
- Office of Development
- Office of Faculty Affairs & Development